The euro posted its biggest monthly decline since May amid speculation the European Central Bank will extend its asset-purchase program as the Federal Reserve prepares to raise interest rates.

The shared currency fell from the highest level in more than a week versus the dollar, extending an October slide that’s seen it weaken versus 11 of its 16 major peers. A global selloff in government bonds has pushed up yields, unlocking about $635 billion of debt for purchase via the ECB’s quantitative-easing plan.

The euro climbed from a seven-month low last week after several surveys on services and manufacturing came in above market forecasts. Yet the outlook for the currency remains bleak as the Fed appears to be on course to tighten policy in December with the ECB seen keeping monetary policy stimulative to prop up growth in the bloc’s sluggish economy.

“We expect further euro weakness in the coming weeks, given our expectation of a Fed rate hike in December,” said Eric Viloria, a currency strategist at Wells Fargo Securities LLC in New York. “This stands in contrast to a dovish ECB, which continues to actively ease monetary policy through asset purchases.”

The euro dropped less than 0.1 percent to $1.0981 at 5 p.m. in New York, extending its decline this month to 2.3 percent. It was little changed at 115.10 yen.

The 19-nation euro was undermined when ECB President Mario Draghi said Oct. 20 that officials didn’t talk about extending or tapering QE at this month’s policy meeting. Meanwhile, speculation intensified that the Fed will raise rates by December. The probability of a hike by year-end climbed to 72 percent, fed fund futures indicate, from 59 percent at the end of September.

Yet the euro bears have something to ponder. The selloff pushed options traders to pay more to buy insurance against euro gains versus the dollar for the first time since May, risk-reversals data show. The implied volatility of one-month calls exceeded that for puts on Monday, signaling a higher price for contracts betting on the euro appreciating than for those wagering on a decline.

Still, hedge funds and other large speculators increased net bearish bets on the euro to 123,856 contracts in the week ended Oct. 25, the most since January, according to the Commodity Futures Trading Commission in Washington.

“We are bearish,” said Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York, who sees the euro weakening to $1.05 during the next three months. “We expect the Fed to hike in December and the ECB to lean dovish” with the currency to be additionally pressured by political developments in Europe.